Is “Saying No in Strategy” an Excuse for not Making Bold Decisions?

    

If you are a leader who is responsible for setting and / or executing strategy then you have heard the making-bold-business-decisions“experts” (other thought leaders, consultants, academics, etc.) say, “Strategy is also about what you don’t do and in many cases what you don’t do is more important that what you do pursue.”

From Michael Porter to Blue Ocean strategy to Playing to Win, the experts present a process of strategic thinking where you understand your markets, customers, and competitors and then decide on your differentiation in order to execute your business plan. They all say that businesses “can’t be all things to all people,” and that the hardest decisions are the ones where you say “no” to certain opportunities that will confuse the strategy and make it more difficult for companies to execute.

Over the past few months, I’ve personally had the opportunity to conduct more than 20 business simulation-centric learning workshops that are building Business Acumen and Strategic Thinking skills. That’s the equivalent of 600 learners and more than 240 different unique “years” of simulated business across 5 industry sectors. Because our simulations are cloud-based and we track data and trends, there are some interesting insights happening in terms of strategic thinking and execution.

A Lack of Big, Bold Decisions

As Tracey & Wiersema declare in their book, The Discipline of Market Leaders, there are only 3 unique value propositions an organization can offer its customers; Product Leadership, Customer Intimacy, and Operational Excellence. There is one big bold bet to be made in each of these value propositions as you execute the strategy. For Product Leadership, it’s all about new best-of-class products. For Customer Intimacy it’s having the best total solution and deep knowledge of customer needs through consultative sales professionals and customer service. And for Operational Excellence, it’s driving cost out of the system through scale managed costs. In our simulation workshops, where participants are running their own global companies and setting their own budgets, they have the opportunity of making unlimited investments in the areas of their choosing in support of their strategy.

Interestingly enough, we are seeing a significant shift in participants making big bold investments in areas of differentiation to create competitive advantage. In looking back to 2019 data, we see more than 53% of participants made a big bold decision to invest in executing their strategy. By big and bold, I mean decisions to invest in an area like R&D that was more that 35% above the industry mean.

Over that past several months that number has fallen dramatically to about 18%. A 35% spread in bold decision making is startling and prompted me to explore the reasons during the Board of Director Presentations that teams make at the conclusion of their simulation run. When pressed, an overwhelming majority of the simulated leadership teams shared that the reason they didn’t make bigger, bolder steps was that they wanted to focus on their core business and say no to riskier decisions.

Short-Term Performance versus Long-Term Growth

Investing and supporting the core business and focusing on maximizing the current value proposition is smart business. And it’s also safe business. Perhaps too safe. A business can drive efficiencies and if the key metrics of performance are things like growing margin and market share then this is a fine way to go. However, I heard way too much in the presentations that the reason for not making big bold bets was due to the fact the teams didn’t want to pursue new products because “we need to say no to certain things and products that are risky don’t seem like a good investment at this time.”

Hiding from Decision Making

Most leaders will say it is foolish and can put your company and career at risk by making big bold decisions that don’t work. However, I am calling out the leaders who hide behind the excuse of “strategy is also about what you don’t do” curtain. Decision making in business must be balanced between the short-term and the long-term and pursuing big bets with the best data you have is an integral part of the process.

In summary, I am glad to see leaders who are developing their skills in leadership development workshops try different things and failing in the “laboratory” rather than the real world. Those leaders that took the conservative path and didn’t take the big, bold steps learned quickly that their enterprise value of their simulated businesses suffered and their Board of Directors where not happy. Hopefully as we start to think about post-pandemic business strategy the bigger and bolder decision making will return.

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Robert Brodo

About The Author

Robert Brodo is co-founder of Advantexe. He has more than 20 years of training and business simulation experience.